HAuCl4
Well-known member
For those running or planning a medium to large size buying/refining operation, this is how some people do it nowadays:
You find several clients that need fine gold on a regular basis and are willing and able to pay OVER spot 0.25%-2% depending on quantities or type of client.
Whenever you get a batch to buy, but your clients do not need any, you hedge it by selling short GLD shares (100 shares is the equivalent of 10 Oz) or futures contracts (bigger boys do this as each contract is equivalent to 100 OZ). (For this you would need an account and cash in it, and some experience, etc).
When your cash client (paying OVER spot) shows up and purchases from you, you take the hedge off.
Notice how you will always be long physical metal and short paper, so when/if the inevitable happens and the paper becomer worthless (if it ever does, but still), you will always have metal and be short a bunch of worthless paper.
Putting and taking the hedge off costs about $0.20 per OZ or less total, but yes you do need capital to operate and have inventory, and a hedging account with a stock/futures broker, etc.
This procedure elliminates/mitigates the price risk for a commercial operation. Of course if you can get a permanent client/buyer that pays spot or near spot that would be a good alternative.
I hope it helps someone.
You find several clients that need fine gold on a regular basis and are willing and able to pay OVER spot 0.25%-2% depending on quantities or type of client.
Whenever you get a batch to buy, but your clients do not need any, you hedge it by selling short GLD shares (100 shares is the equivalent of 10 Oz) or futures contracts (bigger boys do this as each contract is equivalent to 100 OZ). (For this you would need an account and cash in it, and some experience, etc).
When your cash client (paying OVER spot) shows up and purchases from you, you take the hedge off.
Notice how you will always be long physical metal and short paper, so when/if the inevitable happens and the paper becomer worthless (if it ever does, but still), you will always have metal and be short a bunch of worthless paper.
Putting and taking the hedge off costs about $0.20 per OZ or less total, but yes you do need capital to operate and have inventory, and a hedging account with a stock/futures broker, etc.
This procedure elliminates/mitigates the price risk for a commercial operation. Of course if you can get a permanent client/buyer that pays spot or near spot that would be a good alternative.
I hope it helps someone.
